‘Bearish’ Doesn’t Capture Top Economist’s Worry

Boston Herald: Economic `Armageddon’ predicted. Stephen Roach, the chief economist at investment banking giant Morgan Stanley, has a public reputation for being bearish. But you should hear what he’s saying in private. Roach met select groups of fund managers downtown last week, including a group at Fidelity. His prediction: America has no better than a 10 percent chance of avoiding economic “armageddon.”

Daniel Gross (Slate): Being John Snow. If you want to understand why the world worries about the Bush economic team, just check out the speech Snow gave last Wednesday at London’s Royal Institute of International Affairs.

Comments

Posted by: Jojo on November 23, 2004 11:55 PM

In another forum, someone corresponded directly with Roach, who said he is more optimistic that this report indicates. He points to this article he wrote:

Correct link to the Slate article (modified due to the fact that the hostname has suddenly become “questionable content”):

slateDOTmsnDOTcom/id/2110076/

Posted by: Bob M on November 24, 2004 07:07 AM

Bought Sun at 5.04 in April and heroically rode it down and back up. Yay! Now it is 5.20 but I need to get to 5.80 just to break even in Canadian dollars. Doh! Currency risk, they tell me.

Posted by: Anon on November 24, 2004 10:35 AM

At the end of the the Boston Herald article it says:“there may be an alternative scenario to Roach’s. Greenspan might instead deliberately allow the dollar to slump and inflation to rise, whittling away at the value of today’s consumer debts in real terms. Inflation of 7 percent a year halves “real” values in a decade. It may be the only way out of the trap.”

The “deliberate-inflation” solution to oppressive debt was tried once before:to deal with reparations after World War I in Germany.

The results were not pretty.

Posted by: step back on November 24, 2004 12:36 PM

Maybe we can take the last few dollars left in the national treasury and put them into a lucky slot machine in Vegas?

Posted by: Al on November 24, 2004 02:28 PM

“The dollar is in trouble, but it has been in trouble before. Perhaps the past holds the solution everyone seeks.”

I’m not sure Dan’s (and Slate’s) doom and gloom scenarios are too valid. Europe doesn’t exactly look like an powerhouse with their house in order. They’ve got some big problems.

Posted by: Ran Talbott on November 25, 2004 04:44 PM

“Perhaps the past holds the solution everyone seeks.”

And perhaps winged monkeys will fly out of my butt, bearing bars of gold with which to pay off the national debt.

If you’d actually _read_ Bernstein’s article, instead of just cutting-and-pasting the tiny part you wanted to hear, you would’ve seen that he presents pretty much the same arguments that I have in previous discussions of this subject: that the situation is serious, unsustainable, and being both perpetuated and masked by the “co-dependent” actions of some countries that benefit from keeping their export pipelines open.

You also would have seen that Bernstein believes something like a “Plaza Accord II” is _necessary_ to avert what he believes is to be one of those “doom and gloom scenarios”, but that it’s not likely to happen for a variety of reasons. And he wrote that _before_ Snow told the Europeans to pound sand.

“Europe doesn’t exactly look like an powerhouse with their house in order.”

When it comes to government fiscal responsibility, they’ve certainly got _us_ beat seven ways from Sunday (or from Doomsday…). But what difference does that make, either way? Are you under the illusion that there’s a fixed supply of trouble in the world, and the fact that the EC may have problems somehow means there’s less trouble available for us?

Posted by: jerry on November 26, 2004 11:06 AM

“And perhaps winged monkeys will fly out of my butt, *bearing bars of gold* with which to pay off the national debt.”

Uh, really bad visuals on the day after a Thanksgiving feast, but I appreciate your taking this one for all of America.